Appellate Courts in New Jersey and New York Both Rule that a Contract May Reduce Statute of Limitations on Employment Claims

Earlier this summer, a New Jersey appellate court, in Rodriquez v. Raymours Furniture enforced a provision in an employment application that reduced the period in which an employee could sue an employer to six months from the date of the adverse employment action. This ruling – the first of its kind in the employment context by a New Jersey appellate court – is consistent with a New York appellate court ruling just last year involving the same employer and the same employment application (Hunt v. Raymour & Flanigan). These rulings are significant to employers because they provide a concrete yet seldom-used tool to limit exposure to employment lawsuits.

Raymour & Flanigan’s two-page employment application has a provision entitled “Applicant’s Statement” towards the bottom of the second page, immediately above the signature line, which provides in the following form:

Applicant’s Statement – READ CAREFULLY BEFORE SIGNING – IF YOU ARE HIRED, THE FOLLOWING BECOMES PART OF YOUR OFFICIAL EMPLOYMENT RECORD AND PERSONNEL FILE.

…

I AGREE THAT ANY CLAIM OR LAWSUIT RELATING TO MY SERVICE WITH RAYMOUR & FLANIGAN MUST BE FILED NO MORE THAN SIX (6) MONTHS AFTER THE DATE OF THE EMPLOYMENT ACTION THAT IS THE SUBJECT OF THE CLAIM OR LAWSUIT. I WAIVE ANY STATUTE OF LIMITATIONS TO THE CONTRARY.

In the New Jersey lawsuit, nine months after he was terminated as part of a reduction in force impacting 102 workers, Sergio Rodriguez, who signed an employment application with the provision above, sued Raymour & Flanigan under New Jersey’s Law Against Discrimination (“NJLAD”) for disability discrimination and retaliation for filing a workers’ compensation claim. The NJLAD provides for a two-year limitations period. The trial court dismissed the lawsuit as time-barred due to the statute of limitations waiver in the employment application.

The appellate court agreed, finding the waiver enforceable in a decision that hinged largely on the specific language used in Raymour & Flanigan’s employment application. The court rejected Rodriguez’s argument that the waiver was unconscionable and, though it agreed that the application was a contract of adhesion that does not afford applicants an opportunity to negotiate its terms, ruled that this did not render the contract per se unenforceable.

The court determined that the shortened limitations period was reasonable and did not contravene public policy based on the facts of the case, including: (A) the “clear and uncomplicated” terminology in the waiver, (B) the fact that the waiver “was not buried in a large volume of documents,” but rather was “contained in a two-page application and set forth very conspicuously in bold oversized print and capital lettering, just above the applicant’s signature line,” (C) the fact that Rodriguez “was put under no pressure to complete and sign the application quickly,” but rather “was permitted to take it home and complete it at his leisure,” and (D) that a shortened six-month limitations period is not “an unreasonable, conscience-shocking time period,” especially in light of the similar 180-day limitations period for an employee to pursue a discrimination claim administratively before the New Jersey Division on Civil Rights. Notably, the Court distinguished federal claims subject to initial filing with the EEOC. Therefore, for claims involving exhaustion of administrative remedies, a six-month contractual limitations period would indeed be unenforceable.

Given the specificity of the New Jersey appellate court’s analysis (and a similar 2013 holding by the New York appellate court), a judicial template has essentially been created for employers to craft statute of limitations waivers. That is, unless the highest court of one of these states possibly reverses the appellate courts. But for now, here are some takeaways for employers to take advantage of this under-utilized tool:

Use “clear and uncomplicated” language, similar to Raymour & Flanigan.

Place the waiver in a conspicuous area of the document.

Use bold, capitalized and/or oversized print.

Allow applicants or employees ample time to read and consider the waiver (preferably allowing them to bring the document home to complete).

Provide for at least a six-month limitations period (which is a 75% reduction to the NJLAD’s statutory limitations period and an even greater reduction to the 3-year statutory limitations period in New York).

Finally, to ensure consistency, employers should use a similar statute of limitations waiver across all relevant employment policies. The lessons from the Raymour & Flanigan cases are not limited solely to employment applications. Therefore, the waivers should also be added to documents such as handbooks, arbitration agreements and other dispute resolution policies, and offer letters and employment agreements.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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